Suppose that your rich uncle has $1,000,000 that he wishes to distribute to his

Question

Suppose that your rich uncle has $1,000,000 that he wishes to distribute to his heirs at the rate of $100,000 per year. If the $1,000,000 is deposited in a bank account that earns 6% interest per year, how many years will it take to completely deplete the account? How long will it take if the account earns 8% interest per year instead of 6%?

You must use an Excel function. To receive credit, you must write out the excel equation you use. Example: Answer = FUNCTION(variable, variable, etc.)

Explanation / Answer

P = A(P/A, i%, N) => $1,000,000 = $100,000(P/A, 6%,N) N = 15.7 years. Ans $1,000,000 = $100,000(P/A, 8%,N); N = 20.9 years. Ans We Know that F = A [ (1 + i)N - 1] / i Also, F = P(1 + i)N => P(1 + i)N = A[(1 + i)N - 1 ] / i Dividing both sides by (1 + i)N, P = A [ (1 + i)N - 1 ] / [ i (1 + i)N ] = A(P/A, i%, N) => (P/A, i%, N) = [ (1 + i)N - 1 ] / [ i (1 + i)N ] Simply Put the formula in the Excel sheet in a column ..! In first column put P and in 2nd A Now write the Function for F or P using the given formula above. Now write the Function for N . which u can calculate by using above two equations..! Thank you...! Still any doubts..Plz ask..! Thank you..! :)

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